Refusing to go down in flames Featured

10:07am EDT July 22, 2002

Jim Darfus was driving back from the Pickerington branch of his Century 21 Darfus Realty business when he arrived in Lancaster to see fire trucks in front of the Main Street building he’d owned since 1964.

He and his wife, Pat, watched in tears and disbelief as firefighters from all three Lancaster departments fought the Nov. 29, 1994, blaze. Flames tore through the roof, gutting two apartments in the building and damaging a third apartment and five businesses, including their 20-year-old real estate agency. The only injury reported in the fire, the cause of which was never determined, was a firefighter who was treated for minor burns to his face.

“The flames were shooting 20, 30 feet in the air. It just looked like they’d never be able to save it,” Jim Darfus remembers.

While the structural loss was nearly $300,000, the fire’s ramifications were more serious, if considered that the Darfuses had hoped rental income from the building’s tenants would take them into retirement.

“I thought we’d probably lose everything,” he says of his businesses.

Greg Hopkins’ popular Nacho Mama’s restaurant met the same fate July 12, 1997, when—not even three years after it opened on U.S. Route 23 about 7 miles north of Worthington—a fire destroyed the roof of the rented building. Fortunately, no one was injured.

“It was looking like I was going to start actually making money,” Hopkins says of his business before the fire.

Nearly nine months later, he reopened the restaurant and is now grossing more than he did before the fire, which started in an exhaust fan motor outside the building. Still, Hopkins has not fully recovered from the nearly $40,000 it cost him above his insurance coverage to reopen the business.

“I’m not to this day paid off, but I’m catching up. It’s not because I don’t have enough money, but there have been things I didn’t know about,” he says, such as back taxes and outstanding vendor bills.

If he resolves those issues soon, he might consider himself fortunate.

After three-and-a-half years, things still aren’t back to normal for the Darfuses, who could not return to their building until nearly two years later because of delays in insurance claim payments and renovations. That limited the couple’s earning potential because no renters could move back in, either, during that time. Meanwhile, at least their real estate business continued. Pat, augmenting her role as office manager and agent at the realty business, took over its operations while Jim took care of the rebuilding process.

“You just didn’t worry for yourself,” Pat Darfus recalls of the months immediately following the fire. “You had a business to take care of.”

And take care of business they did.

The decision

The Darfuses’ insurance adjuster arrived while the fire was still burning. He recorded the losses while the Darfuses huddled with friends and neighbors who’d come to console them. When the embers had cooled, the couple along with friends and real estate agents who work for them—even firefighters—waded through 4 to 6 inches of water to remove agency records and equipment to store in their garage and at other businesses where colleagues offered them space.

That evening, the Darfuses set out to find a temporary office for their agency.

“We were concerned not only about relocating our own business, but that other people found places to live, [that] businesses found places to go,” Pat Darfus says. Even though the Darfuses were not legally or financially responsible to do so because of a “hold harmless” clause in their landlord/tenant leases, they wanted to help those they could.

The apartment occupants ended up staying with friends or relatives until they found new space, and other business owners relocated or temporarily took up space with colleagues until they could find a location for their businesses.

The Darfuses also relied on colleagues for temporary space, but within a few days, they rented an office up the street from their old agency. That move cost them again. Insurance didn’t cover the $1,100-per-month lease.

They let customers know of their move by advertising in the local newspaper and putting signs on the remnants of their burned building. Meanwhile, they set about sorting through what was left after the fire. Firefighters had placed tarps over filing cabinets, saving many records from total destruction, but the Darfuses still spent hours photocopying water-damaged documents. Other records were safely on computer disk at their accountant’s office.

Pat Darfus remembers hesitating when, shortly after the fire, a longtime client asked her to sell two investment properties. Overwhelmed by the task of getting settled in a temporary office and sorting through ruined property, she almost turned him away.

“He could’ve thought maybe we would flounder, having all this taking place,” she says. He stuck with her, though, and after his properties sold, she thanked him for his confidence.

Hopkins couldn’t operate his restaurant business from a temporary location like the Darfuses did.

A clause in his lease specified that he did not have to pay his $1,600 monthly rent if he was unable to operate in the space, but he was still left without a job. The $20,000 loss-of-income insurance he carried was far from adequate, so he went to work for a catering business, Concert Kitchens in Delaware, from whose owner he had purchased his restaurant.

As for the property damage at Nacho Mama’s, Hopkins’ insurance covered $7,500 in lost inventory and about $40,000 in damaged equipment, which included his stove, griddle and grill. Although the amount was sufficient, the payment was slow. He got his first check nearly three months after the fire. The final check did not arrive until after he reopened the restaurant in April 1998.

Some expenses, such as payroll taxes and workers’ compensation payments that came due right after the fire, were not covered by insurance. Hopkins had to take about $15,000 from his savings to pay those bills.

Still, he didn’t hesitate in deciding to rebuild. In a way, he was stuck. He had no income to start another business, and he had $65,000 of a nearly $90,000 loan out from buying the business in 1994. He looked at other existing restaurants to buy, but they were out of his price range.

“Besides that, I live within 6 miles of here, and there’s nowhere to eat around here,” he says. “I thought I might as well reopen,” he says.

Pat and Jim Darfus, who were 59 and 60, respectively, at the time of the fire, also felt a need to rebuild. Their retirement income depended on it. Sometimes, though, they wonder about all the decisions they made.

“I think we just kind of naturally felt that was the thing to do,” Jim Darfus says. “We’ve just run into so many stumbling blocks.”

In another’s hands

Hopkins had signs from the beginning that he would not lose his customers because of the fire.

“The whole roof is off, there’s piles of garbage out front, and people were still walking in and saying, ‘Are you open?’” he says.

What he didn’t anticipate was the frustration of waiting for renovations to a building that was not his own. Communication was lacking, and missed signals with the out-of-state landlord and insurance agency, for example, forced him to repaint what the contractors had done so he could maintain the “old” look of his restaurant.

Then overly optimistic deadlines tried his nerves. First he was told the building would be ready Dec. 1, 1997. Then he was told he would be able to move in before Christmas. Then, before the first of the year. That soon became Jan. 15, then Feb. 1. With each delay, Hopkins grew more and more frustrated as he’d quit his catering job, then start back at it as it became apparent the deadline would not be met.

When phone lines were installed in January 1998, he recorded messages to keep customers up-to-date on the expected reopening.

At the beginning of March, Hopkins was able to get back into the building to prepare it for reopening, but he hit more glitches. The insurance company would only pay to put the building back the way it was structurally, not for upgrades to meet fire and building codes that had evolved over time. For example, drains in the bar area and near the dishwasher had to be changed before he could reopen. Hopkins decided not to argue the issue of responsibility in order to save the relationship with his landlord, Huntington National Bank for those projects—a line he eventually expanded to more than $20,000. Getting the loan was a bit tricky, however, since he had no income. Hopkins had to wait three months to get approval on the loan, but apparently his bankers trusted his track record.

“I had a banker that was a fan of the restaurant,” he says. “That helped to have people that actually wanted you to be open.”

Just when Hopkins thought he was back in business, another potentially crippling chain of events arose. Before he could get his liquor license back—his bar was 35 percent of his business—he had to get his food license out of escrow. Before that could happen, the fire chief and two building inspectors had to grant him his occupancy permit. Because all were obtained at the last minute, he didn’t even have time to announce his opening April 8. And time was of the essence.

“I had to open the week I opened or I don’t know what I was going to do,” he says, noting that he’d stopped working the catering job in early March to prepare the restaurant for its reopening. “I’d had almost a month of no income. I’d already been through my savings pretty good.”

The lack of opening-night fanfare didn’t hurt him.

“We ended up having about 200 people that night without even announcing it,” Hopkins says. “I don’t know how that happened. I guess I was just a lot more popular than I knew.”

Apparently he’s popular with employees, too, as 17 of the nearly 25 he had before the fire returned when Nacho Mama’s reopened, a fact he attributes to the family atmosphere at his business.

Now, Hopkins is waiting to see whether business will keep up. His first full month back in business grossed $77,000—35 percent more than the $57,000 in sales he’d recorded in the same month a year earlier. On average, he’s now drawing $17,000 in weekly sales. Before the fire, that would have been one of his best weeks. Hopkins has expanded his staff to 30 to meet the increased demand.

“I don’t know if it’s going to continue or not, but we’re happy now,” he says.

The long road back

The Darfuses’ struggle also came from delays in rebuilding.

Ralph Guarasci, president of Insurance Agencies of Ohio, through which the Darfuses have insurance, says the nearly eight months their claim took to settle was unusually long.

“In a way, that claim is one of the ones that emphasized to me the need of getting the parties together right away rather than the agent relying on the adjusters to do that,” he says. Policyholders now meet with their agent and the adjuster in Guarasci’s office as soon as possible after a loss.

Some of the delay came when the Darfuses’ insurance company required detailed lists of replacement costs rather than a more general estimate from a contractor.

Guarasci says that is a challenge in many large losses.

“If we’re talking about a damage claim in your bathroom of $1,500 for water, that’s one thing. But if we’re talking about a $200,000 reconstruction project, the insurance company’s going to want to see where that money comes from,” he explains. “They may want to negotiate on some particular items, and you can’t do that if you just have a bottom line.”

Once the claim was settled—the Darfuses received more than $250,000 in insurance money for replacement costs—the two had to wait an additional 14 months, through zoning approvals and weather delays, while workers finished reconstructing the building. The couple’s insurance policy covered their $2,200-a-month rental-income loss for a year. When their rent-replacement policy ran out, they had to borrow money to keep up with expenses.

In addition, the Darfuses, like Hopkins, needed upgrades to meet modern building code. That meant putting $100,000 of their own funds into the building to pay for code upgrades such as fireproof doors and upgraded wiring. Jim Darfus did much of the renovation work himself in an effort to save expenses, but even so, the Darfuses decided not to put the third floor back on the building because of the additional costs involved.

At least the upgrades lowered the price of their insurance. “Our premiums now are about half the value of what they were then, and the value of the building is twice as much,” Jim Darfus says. He also added coverage for code upgrades should he ever be in a similar situation in the future.

On Sept. 12, 1996, the Darfuses moved their realty company back into the building. They wanted to be on-site to deal with getting other renters, the first of which came in December 1996. By late June of this year, all but 2,400 square feet of the 9,400-square-foot building had been rented, but that’s a far cry from the 100 percent occupancy the Darfuses had in their larger, 10,700-square-foot building before the fire. Jim Darfus expects that once the entire space is rented he’ll have about 10 percent more rental income than before the fire because of increased rates and commercial space. Until then, the Darfuses’ building will continue to provide roughly two-thirds the income it did before. That means they’ll have to put off their retirement.

At times, the Darfuses look back and wonder whether they should have done anything differently. Parking in the area is inadequate, for example, and adding a parking lot might have been an option. In addition, before the fire, they had no debt. Now, they’ll spend a total of 15 years repaying their $100,000 loan.

“Even if we’d made a different decision, it might have been the wrong one,” Jim Darfus says.

“You can’t turn back,” Pat Darfus says. “You have to keep going forward.”

“All in all,” she adds, “five years from now, I don’t think we’re going to be sorry we did this.”